Central billing is a common accounting practice often used by large employee-based companies. In general, central billing typically occurs when a card vendor assigns a common account billing number that can be used by multiple employees or authorized personnel to charge authorized items to the company. The company usually receives a single bill at the end of the billing cycle for all its employees' charges.
In the travel industry, central billing is especially popular and a service offered by most card vendors. As an example, Company A may request a charge card company to assign a Company account number to be used for all of Company A's charged airline tickets or other travel related charges. In this manner, when an authorized person from Company A requests a ticket from Company A's travel agency, the charges will be automatically placed on the Company account instead of the individual's account. Charges throughout a specified billing cycle, e.g., monthly, accrue on the Company's account number for numerous employees and tickets. At the end of the billing cycle, a single bill for all the charges made using the Company account number as the form of payment is usually remitted to the Company for payment. Most companies enjoy the simplicity of receiving one bill for payment at the end of each billing cycle instead of having literally hundreds of individual bills remitted to their travelers.
Central billing, however, creates numerous problems in the area of account reconciliation. Often times the bill recipient, e.g., Company A, includes in its contract with its travel vendor the non-trivial requirement to reconcile the monthly statements issued by its card vendor for its centrally billed account(s): i.e., identify each charge and credit on each account, calculate the total amount of the charges determined to be correct and ready to be paid, and properly apply applicable rebates and fees. In addition, the central billing reconciliation process often escalates as the volume of individual items on each account increases.
The traditional account reconciliation process for centrally billed accounts is a “match/non-match” approach. Continuing with the above example, the travel agency typically receives an electronic copy of the card statement listing all the travel transactions (charges and credits) billed during the cycle. The travel agency conducts a one-time match against Company A's charges and Company A's travel records typically based on a ticket number and creates a list of matched items and a list of unmatched items. Matched items are subsequently forwarded to the Company on a report, which includes the identifying accounting information, such as the travel authorization number, employee ID, project code, or the like captured in the employees' original travel records.
The unmatched items, which include any charge records that do not have corresponding travel records, e.g., tickets that were voided after the day of issue, modifications to tickets made at the airport, and data entry errors (e.g., misspellings), remain unidentified. Typically, companies refuse to pay for unmatched items because many times the company is unable to establish a proper explanation of the charge, e.g., which employee charged the travel ticket. The bill reconciler must then research each unmatched item in order to explain the charge and resubmit for payment. In a voluminous industry, such as the travel/ticket industry, this research process is cumbersome and very time consuming. In addition, it is often the case that the reconciler is simply unable to identify the item when the airline provides incomplete data. Thus, the unmatched item is left unpaid and eventually becomes a write-off for the card vendor.
Most credit card companies have moved to electronic credit card processing which often further complicates central bill account reconciliation. For example, if an authorized employee from Company A purchases a travel ticket from the travel agency on Monday using the centrally billed card account, the card charge is processed electronically and nearly immediately by the card company. So on Tuesday, Company A's travel company shows the record of the ticket issued and its charge card company shows receipt of the charge record. At the end of each week, travel agencies submit reports of ticket sales to the airlines through the Airline Reporting Corporation (ARC). ARC oversees settlement processing for all airlines and charge card vendors to include an accounting of the number of tickets issued and dollars charged. Until Friday of each week, the travel agency has the opportunity to void the travel record/ticket from Company A's ARC report as if it never existed; however, it cannot similarly void the transaction on the Company's central bill account. If the travel agency voids Company A's ticket on Thursday, for example, the charge on the Company's credit card account, which has already been processed, will remain. At the end of the week, when the travel agency submits its sales report to ARC, ARC sees that a ticket has been voided and generates a correcting credit to the Company's central bill account for the voided ticket. When these transactions appear on the Company's account, they are unmatched items. In other words, a charge record for Company A is presented for matching to a ticket record for a ticket that was issued in week one, but which no longer exists. The credit for the voided ticket, which was generated by ARC in week two, is also presented with no matching charge record. In the event that these transactions take place within the established billing cycle of Company A, a chance exists that these debit and credit transactions will appear together on the same month's central bill account. However, in about at least twenty-five percent of the cases, the debit and credit will not appear on the same monthly statement, thus further complicating the reconciliation process.
Additionally, many credit card vendors, like American Express® and Diners Club®, do not permit “carry-over” balances and all charges during the billing cycle are due upon receipt of the bill. In this sense, the Company is asked to pay all the transactions on their account, whether or not a reconciled match is made for each one. Thus, if the debits and credits do not appear in the same cycle, the company may be billed for an item which has been voided, returned, or otherwise not received. Many times, this “overbilling” results in a charge dispute. Therefore, while traditional reconciliation processes generally match a high percentage of the items, this approach is still inadequate. Even a small percentage of unmatched items can equate to a large number of unmatched and unresolved entries that must be researched and corrected.
A system and method for account reconciliation that includes a traditional matching technique to identify and resolve matched items, as well as a tracking, research and correction technique to identify and resolve the unmatched items is needed. Moreover, a system and method for account reconciliation that identifies, tracks and reconciles pending transactions to the account balance, including all accounting items whether matched or unmatched, is needed.